Dividend tax rates rose on 6 April 2026. The basic rate went from 8.75% to 10.75%. The higher rate went from 33.75% to 35.75%. The additional rate stayed at 39.35%.
Two percentage points does not sound like much. On a £40,000 dividend it is £790 a year, every year, and it lands on the group least able to plan around it — owner-managed company directors who take a small salary and the rest as dividends.
A large amount of published UK content still shows 8.75% and 33.75%. Check the date on anything you read. If it does not mention 6 April 2026, it is describing a tax year that has ended.
The 2026/27 dividend tax rates
| Band | 2026/27 | 2025/26 |
|---|---|---|
| Basic rate | 10.75% | 8.75% |
| Higher rate | 35.75% | 33.75% |
| Additional rate | 39.35% | 39.35% |
The dividend allowance is £500. It has been £500 since 2024/25, down from £1,000 in 2023/24, £2,000 from 2018/19 to 2022/23, and £5,000 when it was introduced in 2016/17.
Dividends are always treated as the top slice of your income, so the rate depends on where your dividends sit once your salary, pension, rental profit and everything else has been stacked underneath them.
Which tax year does your return actually cover?
This is where most people go wrong, and it is worth being blunt about.
The return you file by 31 January 2027 covers the 2025/26 tax year. That return uses the old rates — 8.75% and 33.75%. Nothing about the April 2026 rise touches it.
The new rates apply to dividends taken from 6 April 2026 onwards, which you report in the return due 31 January 2028.
| Dividend taken | Tax year | Rates used | Return due |
|---|---|---|---|
| Before 5 April 2026 | 2025/26 | 8.75% / 33.75% / 39.35% | 31 January 2027 |
| 6 April 2026 onwards | 2026/27 | 10.75% / 35.75% / 39.35% | 31 January 2028 |
The practical consequence: if you are budgeting for the tax bill you will pay in January 2028, you cannot use the number from January 2027 as a guide. It will be too low.
How the allowances interact
Two separate allowances apply before any dividend tax is charged, and they work in sequence.
Your Personal Allowance comes first. For 2026/27 it is £12,570. Dividends falling inside an unused Personal Allowance are not taxed at all. If you take a £5,000 salary, £7,570 of Personal Allowance is still unused, and the first £7,570 of dividends is tax-free before the dividend allowance is even reached.
The £500 dividend allowance comes next. It is not a deduction — it is a nil-rate band. The £500 still uses up part of your basic rate band, which is why taking £500 of dividends does not push £500 of other income down a band.
HMRC’s position is that you need to report dividends where they exceed both your unused Personal Allowance and your dividend allowance.
Worked examples
All three assume a director on a £12,570 salary, which uses the whole Personal Allowance, with no other income. The basic rate band is £37,700 of taxable income.
£20,000 of dividends
- £500 at 0% (dividend allowance)
- £19,500 at 10.75% = £2,096.25
- Same dividends under 2025/26 rates: £1,706.25. £390 more.
£40,000 of dividends
- £500 at 0%
- £37,200 at 10.75% = £3,999.00
- £2,300 at 35.75% = £822.25
- Total £4,821.25
- Same dividends under 2025/26 rates: £4,031.25. £790 more.
£60,000 of dividends
- £500 at 0%
- £37,200 at 10.75% = £3,999.00
- £22,300 at 35.75% = £7,972.25
- Total £11,971.25
- Same dividends under 2025/26 rates: £10,781.25. £1,190 more.
The pattern is simple: the extra cost is 2% of every pound of dividend that falls into the basic or higher band. Dividends already taxed at the additional rate cost exactly what they did last year.
The £100,000 problem got worse
Once your adjusted net income passes £100,000, the Personal Allowance is withdrawn by £1 for every £2 above the limit, disappearing entirely at £125,140. That interacts badly with the new dividend rates.
Take the same £12,570 salary and dividends that carry total income from £100,000 to £102,000. That extra £2,000 of dividends produces:
- £715 of dividend tax at 35.75%
- £200 of income tax, because £1,000 of salary is no longer covered by the Personal Allowance
- £250 more dividend tax, because that £1,000 of salary displaces £1,000 of dividends out of the 10.75% band and into the 35.75% band
£1,165 of tax on £2,000 of income — an effective rate of 58.25%. Under 2025/26 rates the same calculation gave 56.25%. If your income is anywhere near £100,000, model the dividend before you declare it rather than after.
If you live in Scotland
Scottish taxpayers pay Scottish rates on salary and most other income, but the same UK rates as everyone else on dividends and savings interest. So the 10.75%, 35.75% and 39.35% figures apply across the whole UK.
What differs is the interaction. Your salary is taxed under the Scottish bands, but the band your dividends land in is determined by the UK basic rate limit of £37,700. A Scottish director on a modest salary and substantial dividends will not get the same answer as an English one on identical figures, and it is not safe to assume the difference is small.
Frequently asked questions
What are the dividend tax rates for 2026/27?
10.75% for basic rate taxpayers, 35.75% for higher rate and 39.35% for additional rate. The basic and higher rates each rose by two percentage points on 6 April 2026, from 8.75% and 33.75%. The additional rate is unchanged.
Do the new dividend rates apply to the tax return I file in January 2027?
No. The return due 31 January 2027 covers the 2025/26 tax year and uses the old rates of 8.75%, 33.75% and 39.35%. The new rates apply to dividends taken from 6 April 2026, reported in the return due 31 January 2028.
How much can I take in dividends before paying tax?
The dividend allowance is £500 for 2026/27. On top of that, any dividends falling within an unused Personal Allowance are not taxed either. A director on a £5,000 salary has £7,570 of Personal Allowance left, so £8,070 of dividends could be tax-free.
Does my company pay tax on the dividends it pays out?
No. Dividends are paid out of profit after Corporation Tax and are not a deductible business cost. The company pays Corporation Tax on its profits, then the shareholder pays dividend tax personally on what is distributed.
Are dividend tax rates different in Scotland?
No. Scottish taxpayers pay the same dividend rates as the rest of the UK. Scottish rates apply to salary and most other income, not to dividends or savings interest.
Getting the salary and dividend split right
The dividend rise changes the arithmetic on how much salary to run through payroll before switching to dividends. That calculation now depends on the employer National Insurance rate of 15%, the £5,000 secondary threshold, and whether your company can claim the Employment Allowance at all — single-director companies usually cannot.
SmartFiling runs RTI payroll from £15 per employee per month, covering auto-enrolment, payslips, P60s and year-end returns, so the salary side is set at the right level and reported correctly from month one. Everything is handled online and reviewed by an ICAEW Chartered Accountant.
